Supervision of compliance is a series of guidance and verification activities on the fulfillment of tax obligations, both those that will, have not, and have been conducted by taxpayers.
DGT conducts supervision on taxpayers and tax objects. Supervision on taxpayers is carried out with a segmentation and territorial approach. Based on this approach, taxpayers are grouped into two, namely strategic taxpayers and other taxpayers. Strategic taxpayers are taxpayers registered at tax offices within the Large Taxpayers RTO, tax offices within the Jakarta Special RTO, and Medium Tax Offices, as well as taxpayers registered at Tax Offices with the largest contribution of tax revenue or other certain criterias. Other taxpayers are taxpayers other than the strategic taxpayer criteria, both those who have or have not had an NPWP, which become the focus of Tax Offices through territorial supervision. Related to tax object, DGT conducts supervision on tax objects both that have and have not been subject to Land and Building Tax obligations.
Planning
• Designation of a supervision plan
• Development of supervision priorities
Monitoring & Evaluation
Conducted within the scope of the Head Office, Regional Office, and Tax Office
Actuating
• Formal compliance verification
• Material compliance verification
• Request for explanation of data and/or information
• Visiting taxpayers
Following-up
• Audit proposal
• Preliminary investigation proposal
• Observation activity and/or intelligence operation proposal
• Appraisal for tax purposes proposal
• Mandatory change of data and/or taxpayer status proposal
• Mandatory changes in service administration and/or facilities proposal
• Notification to taxpayers
• Mandatory correction of legal products proposal Compliance Supervision Business Process
In 2022, DGT improved the business process of compliance supervision by using an end-to-end approach, which consists of planning, actuating, following-up, and monitoring and
evaluation of the supervision to provide
a comprehensive approach.
88 Organizational Performance
Overview 20
Annual 22
Report
verification of formal compliance that is due before the current tax year and verification of material compliance, for example through tax data analysis activities on the tax year before the current tax year, as well as field visits to taxpayer locations.
Strategic Taxpayers Other Taxpayers (Territorial)
• Supervision of high-wealth individuals (HWI) and group taxpayers.
• Supervision of related party transactions with transfer pricing indications.
• Sectoral-based supervision of the largest revenue-
contributing sectors and those that grow above the average national sectoral growth in 2021.
• Sectoral supervision through analysis of dominant sectors, emerging sectors, and business classifications (KLU) and supervision of tax potential on government spending (central, regional, village funds).
• Optimizing the supervision of several types of taxes related to the activities of regional taxpayers such as MSMEs, Self- Construction Activities (KMS), Transfer of Rights on Land and/
or Building (PHTB), and Stamp Duty.
Source: Directorate of Tax Potential, Compliance, and Revenue
Elaboration Realization
Realization of tax revenue from supervision efforts:
Supervision on periodic payment of strategic taxpayers Supervision on periodic payment of other taxpayers (territorial) Supervision on material compliance of strategic taxpayers Supervision on material compliance of other taxpayers (territorial)
1,330,213,176,280,700 248,649,443,008,357 53,441,417,237,861 43,594,245,641,576 Taxpayers required to file annual income tax returns
Number of annual income tax returns received
Compliance ratio of Individual and Corporate Taxpayers Annual Income Tax Return
19,075,197 16,556,75 86.80%
PP 23 taxpayers who conduct remittance 1,061,467 taxpayers
Non-PP 23 taxpayers who conduct remittance 1,670,682 taxpayers
Request for explanation of data and/or information:
Letter of Inquiry issuance in 2022 Completed Letter of Inquiry
Number of taxpayers receiving Letter of Inquiry in 2022 Number of taxpayers with completed Letter of Inquiry Value of Inquiry Reports issued in 2022
525,683 letters 404,825 letters 324,408 taxpayers 248,845 taxpayers Rp 33.22 trillion Additional Notes:
• The Compliance Ratio is a comparison between the number of annual income tax returns received in a particular tax year with the number of taxpayers who are required to file tax returns at the beginning of the year.
• Inquiry Letter is a letter issued by the Tax Office to the taxpayer to request an explanation of data and/or information based on material compliance research that shows indications of material non-compliance and unfulfilled tax obligations.
• Inquiry Report is a summary report containing the implementation and results of requests for explanations of data and/or information.
Source: Mandor application as of December 31, 2022, Approweb application as of December 31, 2022, and Coro application accessed on January 5, 2023. Directorate of Extensification and Valuation and Directorate of Tax Potential, Compliance, and Revenue.
Target of Supervision Activities, 2022
Performance of Supervision Core Activities, 2022
Organizational Performance 89
Overview
2022 AnnualReport
3. Audit
DGT conducts tax audits with the aim of compliance examination of the fulfillment of tax obligations and for other purposes to implement the regulations in taxation.
In 2022, the strategies carried out by DGT in the terms of audit include:
a. determination of audit priorities, such as on:
1) taxpayers engaged in emerging sectors (e-commerce, logistics and expedition, as well as VAT on Trade through Electronic System business actors and merchants);
2) taxpayers engaged in potential sectors (health and pharmaceuticals, minerals and coal, oil and gas, and financial technology);
3) strategic taxpayers and other taxpayers with the following criteria: taxpayers who have been granted a pre- audit refund of tax overpayment, taxpayers who file Loss Annual Income Tax Return of No Overpayment, group taxpayers, taxpayers having affiliated transactions or indicated to conduct transfer pricing, withholding agent taxpayers, taxpayers engaged in the management of natural resources and their derivatives, taxpayers who obtaining/utilizing income tax facilities, high-wealth individual taxpayers, prominent taxpayers, taxpayers with retail trade business, and taxpayers who do not file the Notice of Land and Building Tax Object (SPOP);
b. optimizing the implementation of pre-audit refunds to taxpayers who submit Overpaid Tax Returns refund;
c. optimizing the preparation and implementation of audits to produce high-quality notice of tax assessment;
d. implementation of comprehensive quality control of audit implementation from the supervisor level, head of audit implementation unit (UP2), and Head of Regional Office;
e. synergy and collaboration among positions that carry out supervision and law enforcement functions and capacity Extensification activities are carried out based on data and/or information, which include external data, internal data, and data obtained from field data collection activities (KPDL). Based on the data from KPDL, DGT will obtain data on taxpayers with NPWP and those without NPWP. KPDL data result on taxpayers without NPWP will then be processed and produce a List of Extensification Targets (DSE).
Extensification activities are also supported by more effective administration through the development of information systems and applications. In 2022, DGT has made improvements to the SIDJP NINE application specifically in Extensification Module 3.3 which includes the addition of income estimation information and the addition of detailed field data information in the form of recorder data, location coordinates, and location type.
addition of taxpayers as the result of extensification in 2022
34,599
Source: Directorate of Tax Extensification and Valuation
90 Organizational Performance
Overview 20
Annual 22
Report
Elaboration Realization
Completion (Audit Report/LHP) 45,674.95 convertion of audit reports
Revenues from audit and collection efforts Rp41.17 trillion*
Refund Discrepancy Value Rp11.37 trillion
Audit effectiveness 97.95%
Additional Notes:
• There is a joint KPI for PPKM revenue from audit and collection.
• Refund discrepancy is the amount of tax that can be retained by tax auditors on submissions for refunds (restitution) submitted by taxpayers through tax returns.
• Calculation of Audit Effectiveness based on the achievement of KPI of Audit Effectiveness Level Source: Pegasus as of December 31, 2022, Directorate of Tax Audit and Collection
Taxpayer Categories Elaboration
Corporate Taxpayers Mandatory-tax-return-filing taxpayers 1,567,126 taxpayers
Audited taxpayers 33,582 taxpayers
Ratio 2.14%
Individual Taxpayers Mandatory-tax-return-filing taxpayers 3,665,184 taxpayers
Audited taxpayers 12,253 taxpayers
Ratio 0.33%
Total ratio 0.88%
Additional Notes:
• Audit coverage ratio (ACR) is the number of audit coverage calculated based on the ratio of the number of taxpayers audited to the number of taxpayers required to file tax returns.
• The audit coverage referred to is an audit to examine compliance (special and routine audits), excluding audits for other purpose.
Source: Directorate of Tax Audit and Collection
4. Valuation
Valuation for tax purposes is a series of activities in order to determine a certain value of the object of valuation at a certain time based on a valuation standard in order to implement the regulations in taxation, including business standardization.
The valuation function, which was intended only to focus on determining the Land and Building Tax value, has now been expanded to support other functions, such as supervision, audit, collection, and international taxation. The characteristics of the object of valuation are also increasingly diverse, including the valuation of criterion I property, criterion II property, criterion I business, criteria II businesses, and intangible assets.
Audit Performance, 2022
Audit Coverage Ratio, 2022
Organizational Performance 91
Overview
2022 AnnualReport
Valuation Objects Total of Valuation
Reports
Valuation Result Value
(billion Rp) Sales Value of Taxable Object - Field 1,390 523,926 Sales Value of Taxable Object - Office 9,673 13,514,968
Property I 3,964 7,058
Property II 774 69,331
Business I 656 90,048
Business II 643 171,940
Intangible Assets 36 2,697
Total 17,136 14,379,968
Note:
Detailed criteria for Property I, Property II, Business I, and Business II are set out in Director General of Taxes Circular Letter No. SE-54/PJ/2016.
Source: Appraisal app as of December 31, 2022, Directorate of Tax Extensification and Valuation